Interest Charges

• The longer you refuse to pay a small claims judgment, the more you will owe. Each state permits creditors to add annual interest charges to the unpaid balance of their judgments. State regulations vary regarding the amount of interest a creditor may charge. In California, for example, your creditor can add ten percent interest to the unpaid judgment each year. Thus, the longer you neglect to pay off your judgment, the more you owe.
  
  

Involuntary Collection

• Before obtaining a judgment through small claims court, your creditor had no choice but to rely on your willingness to make voluntary payments on the debt. A small claims judgment, however, grants the plaintiff the right to collect the debt involuntarily. Like interest charges on judgments, state laws differ regarding the legal action a creditor can take when forcing you to pay off a judgment. The majority of states, however, allow judgment holders to garnish your wages and bank balances and to record liens against your real estate and personal property.
  
  

Enforceability Period

• Although a small claims judgment gives the plaintiff additional collection options, she only enjoys these options for the length of time that the judgment itself remains valid. For example, if your state only permits creditors to enforce judgments for seven years, after eight years pass, the creditor can still collect from you but cannot force you to pay off the debt through a lien or garnishment.
  
  If you do not pay off the judgment within the enforceability period, your creditor can request that the court "renew" the original judgment. Should the court do so, the judgment remains valid for a subsequent enforcement period, giving your creditor additional time to utilize his judgment when recovering your unpaid debt.
  
  

Judgment Proof Consumers

• For a small number of individuals, there is no penalty for not paying a small claims judgment. These consumers are "judgment proof." A judgment proof individual is someone who is either unemployed or whose entire income is exempt from garnishment and who owns no property. An example of a judgment proof debtor would be an individual who rents her home and lives solely on Social Security benefits. Because the consumer's home does not belong to her, the creditor cannot record a lien against the property. In addition, the creditor cannot garnish the debtor's Social Security payments. The creditor still reserves the right to collect, should the individual decide to pay, but cannot use the small claims judgment to force the judgment proof debtor to submit payment.